CJEU does not allow too general anti-abuse and substance provisions for holding companies (Deister Holding and Juhler Holdin…

On 20 December 2017, the Court of Justice of the European Union (CJEU) issued its judgment in joined cases Deister Holding AG (C-504/16) and Juhler Holding A/S (C-613/16) v Bundeszentralamt für Steuern. In this ground breaking judgment, the CJEU confirmed that the German anti-abuse provision for withholding tax relief for dividends paid by a German company to certain parent companies resident in another EU member state is too general. Therefore that provision is incompatible with the EU Parent-Subsidiary Directive and the EU freedom of establishment. For the CJEU, neither the tax treatment of the EU parent company’s shareholders nor the type or composition of economic activities of the EU parent company is relevant for assessing the existence of abuse. This has a strong impact on EU anti-abuse rules and substance requirements for holding companies.


The German anti-abuse provision denies the withholding tax exemption if:

Subjective scope: the shareholders of the interposed holding company would not be entitled to such relief if they earned the German dividend income directly, and
Three conditions test: (1) there are no economic or other relevant reasons for interposing the holding company, or (2) the holding company does not generate more than 10% of its gross income through its own economic activities or (3) the holding company does not have a business organisation that is adequately equipped for its business purposes.


The CJEU confirmed that the German anti-abuse provision is not in line both with the EU Parent-Subsidiary Directive and the EU freedom of establishment. According to the CJEU, the legislation at stake is too general and does not have the specific objective of targeting wholly artificial arrangements which do not reflect economic reality. Furthermore, the tax treatment of the shareholders of EU parent companies is irrelevant for the purposes of benefiting from the EU Parent-Subsidiary Directive. Nor does this Directive contain any requirement as to the type of economic activity of EU parent companies or the percentage of income derived from own economic activities.

In addition, the CJEU stated that the verification of any of the ‘three conditions test’ creates an irrebuttable presumption of abuse without the possibility of the taxpayer demonstrating valid economic reasons. According to the CJEU those three conditions (individually or as whole) do not imply by themselves the existence of a wholly artificial arrangement which does not reflect economic activity. In any event, the analysis of such artificiality should be made based on a global assessment taking into account the organisational, economic or other substantial features of the group of companies to which the parent company in question belongs and the structures and strategies of that group.

Our observations

This judgment shows a strict approach of the CJEU to domestic anti-abuse provisions. If such provisions are too general, apply automatically and therefore create a general presumption of abuse, most likely they are not in line with EU Law. Furthermore it also provides a fresh view on the existence of substance requirements for EU holding companies, requiring a case-by-case analysis of the overall situation at stake considering economic and organisational characteristics and strategy of the whole group. We expect that anti-abuse provisions in other Member States would be impacted by this judgment as well.